Australia Dollar Declines Versus Yen Before Inflation Data, BOJ

The Australian dollar declined for a
second day versus the yen before an inflation report this week
that may prompt further interest-rate cuts, damping demand for
the nation’s assets.

The so-called Aussie retreated from a more than four-year
high against the yen reached last week amid speculation the Bank
of Japan (8301) will fail to meet market expectations for stimulus when
it concludes a two-day policy meeting tomorrow. New Zealand’s
dollar fell to a two-week low as Asian stocks halted gains.

“Leading into this week’s inflation number, the market is
going to be a little bit cautious” on Australia’s dollar, said
David Greene, a senior corporate currency dealer at Western
Union Business Solutions, a global payment services network.
“We may see some flows back into the yen if the BOJ decision
isn’t what the market was hoping for and that may see the Aussie
lower.”

The Australian dollar declined 0.6 percent to 94.15 yen as
of 4:30 p.m. in Sydney, and traded little changed at $1.0511
after touching $1.0486 on Jan. 18, the least since Jan. 8. It
touched 95.03 yen on Jan. 18, the most since August 2008. New
Zealand’s currency, known as the kiwi, weakened 0.8 percent to
74.85 yen. It declined 0.1 percent to 83.57 cents, after
touching 83.34, the lowest since Jan. 7.

A reading of 0.6 percent or lower will prompt traders to
increase bets on a rate cut when the Reserve Bank of Australia
meets Feb. 5, according to National Australia Bank Ltd.

Rate Cuts

Swaps traders are betting on a 47 percent chance of a rate
cut to 2.75 percent next month, after a 0.25 percentage point
reduction to 3 percent on Dec. 4, data compiled by Bloomberg
show.

The yen strengthened against the Aussie and New Zealand
dollar after Koichi Hamada, who’s advising Prime Minister Shinzo
Abe on choosing a new Bank of Japan chief, said yesterday the
bank will need to slow monetary easing if the effects on prices
and the yen go too far. Vice Finance Minister Shunichi Yamaguchi
said last week Abe’s administration anticipates the BOJ will
adopt a 2 percent inflation target.

The MSCI Asia Pacific Index fell as much as 0.4 percent
before trading little changed.

Yields on Australia’s 10-year government securities fell 5
basis points, or 0.05 percentage point, to 3.36 percent. New
Zealand’s two-year swap rate, a fixed payment made to receive
floating rates which is sensitive to interest-rate expectations,
was unchanged at 2.81 percent.